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This paper demonstrates that, when countries individually choose whether or not to prohibit parallel imports, a global Nash equilibrium involves the permitting of parallel importing into all relevant foreign markets i.e. global uniform pricing. This result is sensitive in a straightforward way to the tariff-setting powers of countries and to the specification of a government's objective function (i.e. political economy considerations). We also show that when countries can prevent 'parallel exports' then any Nash equilibrium involves global price discrimination.

This paper demonstrates that, when countries individually choose whether or not to prohibit parallel imports, a global Nash equilibrium involves the permitting of parallel importing into all relevant foreign markets i.e. global uniform pricing. This result is sensitive in a straightforward way to the tariff-setting powers of countries and to the specification of a government's objective function (i.e. political economy considerations). We also show that when countries can prevent 'parallel exports' then any Nash equilibrium involves global price discrimination.

We consider the simultaneous choice of parallel importing regime & tariff policy in a setting of international price discrimination by a monopolist. We show that an importer's optimal tariff decreases when parallel imports (PIs) are permitted. This may lead to the monopolist benefiting from PIs. Allowing PIs is always attractive for a country whether or not it sets an optimal tariff. In a political economy modification, we show that the prohibition of PIs is more likely to emerge (where it would not otherwise) the more the government cares about lobby contributions & the greater are profits from price discrimination. 1 Table, 7 References. Adapted from the source document.

We examine the interaction between commodity taxes and parallel imports in a simple two-country model with imperfect competition. While governments determine non-cooperatively their commodity tax rate, the volume of parallel imports is determined endogenously by the retailing sector. We compare the positive and normative implications of having commodity taxes based on destination or origin principle. Origin taxes are shown to have very attractive properties: they lead to lower levels of optimal taxes, they converge as parallel imports increase (while destination taxes diverge), and they lead to higher welfare levels

Price controls create opportunities for international arbitrage. Many have argued that such arbitrage, if tolerated, will undermine intellectual property rights and dull the incentives for investment in research‐intensive industries such as pharmaceuticals. We challenge this orthodox view and show, to the contrary, that the pace of innovation often is faster in a world with international exhaustion of intellectual property rights than in one with national exhaustion. The key to our conclusion is to recognize that governments will make different choices of price controls when parallel imports are allowed by their trade partners than they will when they are not.

We develop a model of vertical pricing in which an original manufacturer sets wholesale prices in two markets integrated at the distributor level by parallel imports (PI). In this context we show that if competition policy requires uniform wholesale prices across locations it would push retail prices toward convergence as transportation costs fall. However, these retail prices could be higher than those induced without restrictions on prices charged to distributors. Thus, the competition policy may not be optimal for consumer welfare.